Schäuble: ‘Greece making progress’ and the IMF revelation

“Greece is on track to regain credibility. The more credibility it gains the easier it will be for the country to continue getting the support it may need in the future,” Wolfgang Schaeuble told the Ta Nea newspaper, Reuters reported.

The minister defended the mix of fiscal austerity and reforms which has left the economy in a deep recession, saying the policies were starting to bear fruit, but that patience will be needed before Greece can stand on its own feet.

“Right now all macroeconomic indicators are showing that the recipe is yielding fruit. But more time will be needed than what many in Greece would desire,” Schaeuble was quoted as saying.

Fast forward:

Yesterday the IMF’s own assessment of the disaster inflicted upon Greece was made public. This on Alphaville:

In an internal document marked “strictly confidential,” the IMF said it badly underestimated the damage that its prescriptions of austerity would do to Greece’s economy, which has been mired in recession for years…

On the troika

There was no clear division of labor. Fund collaboration with the World Bank on country programs rests on an agreed division of labor. There was no such clarity in the assignment of responsibilities across the Troika. The EC needed to be involved in all aspects of the program to ensure conformity with European laws and regulations. While the Fund had experience designing fiscal adjustment, the EC had its own fiscal targets from Maastricht. The EC had structural reforms expertise, but so too did the Fund, particularly in the fiscal area. And from the Fund’s perspective, the EC, with the focus of its reforms more on compliance with EU norms than on growth impact, was not able to contribute much to identifying growth enhancing structural reforms. In the financial sector, the ECB had an obvious claim to take the lead, but was not expert in bank supervision where the Fund had specialist knowledge.